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Is Alibaba Worth Its $230 Billion Valuation?

11/12/14

michael

Alibaba is a hugely successful e-commerce company with a $230 billion valuation. As average consumers, we wonder if the company is actually worth $230 billion and if so, how can businesses model themselves after Alibaba to see similar success on a smaller scale? To begin to answer these questions, we first need to take a look at who the Alibaba Group is:

The Alibaba Group

The Alibaba Group consists of 3 primary businesses: Taobao, Tmall, and Alipay. Taobao deals with mainly consumer to consumer (C2C) products while Tmall works mostly with name brand items. Alipay is a third-party online payment system similar to Paypal. While Alibaba has not fully emerged yet in the U.S., their presence in China is huge. Taobao and Tmall are the third and eighth most visited websites in China respectively. In a way, Alibaba is like the Amazon.com of China.

Alibaba vs. The Competition

Amazon’s value currently sits at roughly $153 billion. If Alibaba is at $230 billion, then it would not only be worth more than Amazon, but it would be worth more than both Amazon and eBay combined! eBay is estimated to be worth approximately $65 billion.

So is Alibaba really worth 230 billion dollars? The answer is yes and here’s why: According to its IPO filing with the SEC, Alibaba made over $6.5 billion dollars in revenue during the last nine months of 2013, nearly half of which was profit. In a more recent analysis, it was found that Facebook and Alibaba posted similar revenues in the last quarter. Facebook made $2.9 billion to Alibaba’s $2.54 billion.

Alibaba Group is worth its $230 billion price tag and the numbers speak for themselves but what do they do that makes them so successful? Most, if not all of their services occur online through their website, www.alibaba.com. At a glance, some of the key features that you will notice about their site is that it loads very quickly, very user friendly, and well organized. People are able to easily navigate through the site to find what they are looking for. Here are some quick tips on what your small business can do in order to increase conversion rate.

Fast-Loading Website

One way to increase your conversion rate is to keep as many visitors as you possibly can on your webpage. In the graph below, you will notice how a fast-loading website can greatly increase your conversion rate. Most online users will often wait a maximum of 2 seconds for load time, any time exceeding that, people will most likely abandon your page.

Ease of Navigation

Having a website that’s easy to navigate will help you keep visitors staying on your webpage longer and further increase your conversion rate. If a website is confusing and difficult to use, people will simply just leave the site. Alibaba’s website makes it easy for one to search for products and organizes all items into categories, making it easier for you to find exactly what you were looking for.

Applying Alibaba’s Techniques For Your Business

When you are considering to have a website built for your company, make sure to keep the consumers in mind. An ideal website such as Alibaba should load very quickly to prevent your visitors from abandoning your website and it should not be very confusing at all to navigate through. Your visitors want to be able to search and find the items they are looking for quickly without going through a ton of loops and obstacles. Keeping these tips in mind will ensure a positive experience for your customers and will ultimately help to increase conversation rates and sales for your company. For any questions or inquiries about e-commerce websites, please contact us at 626.400.4511 or fill out a form for a free quote!